RBI Governor Calms Markets as Rupee Stays Near Record Low Amid Oil Surge

Reserve Bank of India (RBI) Governor Sanjay Malhotra said India’s rupee situation remains “normal” despite the currency trading near its record low. His remarks came on Friday, 17 July, as the rupee recovered slightly after four straight sessions of losses but remained under pressure from rising crude oil prices and heavy foreign portfolio investor (FII) outflows.

The rupee opened at 96.35 against the US dollar and strengthened to 96.28, gaining 14 paise from its previous close of 96.42. Even after the recovery, the currency traded just 0.55% below its all-time low of 96.83, recorded on 20 May during the peak of the Iran-related energy shock. Forex traders said positive domestic equity sentiment supported the rupee, while elevated oil prices and continued FII selling capped gains.

Speaking to DD News, Malhotra said the strengthening US dollar after the West Asia conflict had weakened several global currencies. He said that, viewed in a global context, the Indian rupee’s performance could be considered normal. He also said India’s balance of payments is expected to remain strong in the near to medium term, supported by recent policy measures and the strength of the external sector. He cited record gross foreign direct investment of around $95 billion last year and net FDI inflows of about $7 billion during the first two months of the current fiscal year.

The RBI Governor said it is too early to discuss interest rate hikes even though inflation has moved above the central bank’s 4% target for the first time in 18 months. He said monetary policy decisions continue to be guided by India’s GDP growth and inflation outlook, with the RBI monitoring headline CPI inflation, core inflation and the underlying drivers of price increases while targeting 4% inflation within a ±2% tolerance band. He added that recent inflation pressures have largely been driven by supply-side factors.

Malhotra also warned that renewed US-Iran tensions could create upside risks for inflation because India imports around 90% of its crude oil, with nearly half of its pre-escalation imports passing through the Strait of Hormuz. The RBI has kept the repo rate unchanged at 5.25% throughout this year while continuing to focus on balancing inflation control with economic growth.

The Governor said artificial intelligence presents cybersecurity and data privacy risks, while adding that India’s external sector remains resilient. He also said bank credit growth remains satisfactory, with overall credit expanding around 18% year-on-year in June. According to him, key sectors continue to record strong double-digit credit growth, and the RBI currently sees no major credit-related risks.

Malhotra said India remains one of the world’s fastest-growing major economies despite global uncertainty, including geopolitical tensions in West Asia. He noted that the economy grew 7.7% last year, while the RBI has projected 6.6% growth for the current fiscal year.

The Indian rupee has been Asia’s worst-performing currency in 2026, declining more than 5% since the West Asia conflict began in late February. Analysts said the currency is likely to remain in the 96.00-96.50 range in the near term, while the RBI has continued to intervene in the foreign exchange market. Bankers estimate the central bank sold a net $53 billion in FY26 to support the rupee.